The following five articles were first published as a series in June 2013 on TIME Magazine’s blog

SPECIAL RE

Battleland. They have been excerpted and updated, and are presented here with permission of
Battleland’s editor. The original of the first article, and links to the other four, can be found at
http://nation.time.com/2013/06/03/the-new-era-of-good-f-35-feelings/.

The New Era of Good F-35 Feelings
By Winslow Wheeler, Director, Straus Military Reform Project

There has been good news for the F-35

Joint Strike Fighter. No longer are top
Department of Defense (DOD) officials covering their bets by casting
aspersions at it, especially on the galvanizing matter of cost, previously
described—by them—as unaffordable.
In April, Secretary of Defense
Chuck Hagel told Congress that F-35
costs “are coming down,” and F-35
Program Manager Lt. Gen. Christopher Bogdan reaffirmed that “cost
continues to come down” as the “Lot
5” buy costs less than the previous
one. The Navy’s commander of the
Naval Air Systems Command, Vice
Admiral David Dunaway, characterized the F-35 as basically a done deal,
declaring it to be a “fairly mature air
vehicle.”
In some controversial assertions,
even the Government Accountability
Office (GAO) described the program
in a March report as making “con-

PORT

What
Does
an F-35
Really
Cost?

siderable progress,” a characterization that Lockheed consultant Loren
Thompson celebrated, saying GAO
now has “no new advice…on how to
manage [the F-35 program] better.”
The ultimate gesture came in May,
when DOD released its most recent
Selected Acquisition Report (SAR)
announcing a $4.5 billion reduction
in the total program cost of the F-35.
Gone are the days when the top
DOD acquisition official (Frank Kendall) described the F-35 program as
“acquisition malpractice.” Joining
the new vogue, Kendall has subsequently stated, “I feel much more
comfortable” about the F-35.
The real test of whether the F-35
is making “considerable progress”
is two-fold: 1) How does the aircraft
perform? 2) Are the costs really “coming down?”
The flight-test program is hardly
mature. The plane is about 40 percent
through its scripted, contract-specifi-

cation verification (developmental)
flight testing, which, according to
GAO, will probe only 17 percent of
the F-35’s capabilities. The more rigorous battlefield testing will not start
until 2018; when the results of those
tests are available in 2019, we will be
able to use actual data to assess just
what performance characteristics the
F-35 has.
The assertions that F-35 costs are
coming down are the critical assurances right now. Expense, which has
doubled from $81 million per aircraft
in 2001 to $161 million in 2012, is the
biggest roadblock to the program’s
future. But DOD and others are saying the corner has been turned.
We shall see. In the next article,
we will take a look at how the Pentagon manipulates the cost of weapon
systems. n

The cost of an F-35 is currently increasing, more than likely to remain high,
and very unlikely to even approach the low levels being articulated by Pentagon managers and documents.
But F-35 unit costs are clouded by include the engine. The SAR considthe calculating ways the Pentagon ers it separately. If you want a fighter
reports them. The applicable empiri- with an engine, add $21.8 million to
cal data have been obscured, and it is the base-year PAUC, and $26.2 milthey which are the most informative. lion to the then-year PAUC. That
DOD’s Selected Acquisition Report makes the Program Acquisition Unit
(SAR) on the F-35, considered the Cost for each F-35 $130.0 million in
definitive statement of the program’s obsolete 2012 dollars or $159.2 milcost, is a typical example. It cites three lion in actual appropriations, past,
present, and future.
forms of the cost to buy an F-35.
If all this is not confusing enough,
The Program Acquisition Unit
Cost (PAUC) divides the total acquisi- the SAR also calculates the Average
tion expense, including research and Procurement Unit Cost (APUC). This
development, procurement, and mil- divides the total F-35 procurement
itary construction, by the total num- budget (not including R&D and Milber of planned test and operational itary Construction) by the number
aircraft (2,457). The total acquisition of operational aircraft actually to be
expense is stated in either “base- fielded (2,443). The F-35 APUC (with
year” ($319 billion) or “then-year” an engine) is $104.8 million in base($391 billion) dollars. Base-year dol- year (2012) dollars and $135.7 million
lars means every dollar is adjusted to in then-year dollars.
For some, however, the base year
match the inflation value for the year
when the program was last “restruc- APUC numbers for the F-35 are still
tured” to address problems. In the too high for marketing. The DOD
case of the F-35, that year is 2012. SAR lists something called Unit
Then-year dollars are the amounts Recurring Flyaway (URF) costs. But
actually appropriated or expected to the URF does not include the support
be appropriated in the future; they and training equipment, technical
are adjusted to the inflation value of data, initial spare parts, or even the
the year in question. Base-year dol- gas and lubricants to make an F-35
lars are usually from an earlier year usable. The URF cost will not get you
when they had higher purchasing an F-35 you can fly away, not for compower; thus, they frequently calcu- bat, not for training, not even for the
late to a lower number that dissem- delivery hop.
A favorite of F-35 lobbyists and
bling advocates prefer.
The SAR reports the base-year marketers, the URF for the F-35 varies
PAUC for the F-35 as $108.2 million, from $76.8 million to $103.6 million,
and the then-year (actual appropria- depending on the model. Lockheed
likes to cite the URF, but no flyable,
tion) PAUC as $133.0 million.
That’s fine as far as it goes, except usable F-35 in any operable force will
for one thing: those amounts do not ever be bought for those prices.
2

The Defense Monitor | April-June 2013

In fact, all of these numbers are
grounded in analytical quicksand.
First, the PAUC’s numbers depend
on amortizing $55.2 billion thenyear dollars of R&D across the officially predicted production of 2,457
F-35 units. The planned number has
already come down from 2,866, and
as DOD insiders routinely predict,
they will come down further.
More importantly, both the PAUC
and the APUC projections depend on
a “learning curve” that shrinks unit
cost for each future F-35 produced
based on assumptions of progressively increasing efficiency and economies of scale in F-35 fabrication that
is supposed to occur after the design
stabilizes and procurement lots double and even triple.
The problem is that the learning
curve never occurs as predicted. This
has been reported in great detail by
Pentagon insider Chuck Spinney in
“Defense Death Spiral” and his final
testimony to Congress. The aircraft’s
design never actually stabilizes, even
after full-rate production starts: the
need to redesign and fix a progression of failures exposed in tests and
operations, an unending stream of
add-ons imposed by the procuring
bureaucracy, plus labor problems
and unforeseen economic and budgetary changes mean that the learning curve is mostly fantasy. (We have
just seen one example of unanticipated budget changes in the form of
the reductions mandated by the Budget Control Act, also known as the
Sequester.)
As a result, unit costs remain
significantly higher; then, to “save
money” and fit under budget limits,

SPECIAL REPORT

for the entire fleet.
However, both the APUC and
PAUC for the F-35 in the new 2013
SAR are lower. And, there are other
questionable numbers in that document. The total—36-year—program
acquisition cost is predicted to be
$4.5 billion lower: decreasing from
$395.7 billion estimated in 2012 to
$391.2 billion estimated this year. The
basis of this $4.5 billion reduction is a
predicted savings in prime and subcontractor labor rates out to the year
2037 for aircraft—but strangely not
engine—production.
That such fantastically long-term
estimates are recalculated to form
the basis of “savings” stresses credulity to the breaking point. The most

recent SAR’s statement that “we project that it is equally likely that the
estimates will prove too low or too
high for execution of the program
described” only reinforces justifiable
skepticism.
PAUCs based on unachievable
production numbers, APUCs derived
from learning curves that never happen, URFs that assume that purchasers want to buy airplanes they cannot
operate, prices translated into obsolete dollars, convenient declarations
of savings to be realized 25 years
from now, predictions proclaimed to
be as reliable as a coin flip—these and
other dodges add up to a snake pit of
misinformation about what an F-35
costs, past, present and future. n

U.S. Air Force photo by SSgt Nicholas Egebrecht/Released

production lots are reduced causing
even more growth in unit cost—the
so-called “death spiral,” the constantly recurring phenomena of DOD
finding itself buying a smaller inventory of equipment for an increasing
amount of money.
This recurring phenomenon is
alive and well in the F-35 program.
In the SAR released last year, the F-35
program projected production to
ramp up to 110 units in 2018 and 130
in 2021; the SAR released in 2013 quietly reduced the 2018 buy to 100 aircraft and the 2021 buy to 120. Only a
9 percent reduction for 2018, it would
nonetheless incur some increase in
F-35 unit cost in 2018 and, therefore,
also in both the APUC and the PAUC

U.S. Air Force F-35A Lightning II Joint Strike Fighters from the 58th Fighter Squadron, 33rd Fighter Wing, Eglin AFB, Fla. The 33rd Fighter
Wing is a joint graduate flying and maintenance training wing that trains Air Force, Marine, Navy and international partner operators
and maintainers of the F-35 Lightning II.

www.pogo.org

3

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The Deadly Empirical Data

O

By Winslow Wheeler, Director, Straus Military Reform Project

bjective observers need reliable data for 2010: it is R&D spending that has been declining, albeit
measuring F-35 unit cost: the empirical somewhat erratically thanks to the chaos in the F-35 procount of the dollars Congress and DOD gram.
R&D spending is projected after 2014 to continue to
have jointly directed at the F-35 program
each year, divided by the number of air- ramp down to less than $50 million in 2018 as procurecraft actually bought that year. The math is simple, and ment spending increases to as much as $16 billion in
calculation is straightforward, devoid of gimmicks. It 2021. Both the Air Force and Navy have other expandbrings a level of empirical reality to the cost calculation ing acquisition priorities competing for this same money.
that the swamis of DOD cost-gimmickry hate and avoid. With DOD budgets projected to grow only modestly, if at
These numbers are readily available in a convenient all, will the Air Force and Navy be able to more than douformat, going all the way back to the beginning of the ble F-35 procurement spending from the current level of
F-35 program in 1994 as a part of the DOD Comptroller’s $8 billion to $16 billion, as is currently planned? It is not
annual budget materials titled Program Acquisition Costs by at all likely.
If the F-35 unit price fails to get as low as $85 milWeapon System. However, as with almost all DOD financial information, there is an important caveat: the num- lion in the next decade, as predicted by General Bogdan,
bers displayed are estimates; they have not been audited. the Pentagon may find itself having to pay even more to
We have no independent assurance that all the money acquire a smaller number of aircraft. This has happened
displayed was actually spent for F-35-related activities, many times in the past; a relevant example is the F-22,
nor that other monies from outside the F-35 program which shrank dramatically in numbers bought but balweren’t spent on the F-35. The annual spending totals in looned to well over $400 million per aircraft.
Up through 2014, 182 aircraft will have been authothese reports frequently do not conform to the amounts
in DOD’s Selected Acquisition Report (SAR). The number rized for purchase; 106 for the Air Force; 76 for the Navy
of aircraft purchased in one year, 2011, do not even agree and Marine Corps. According to GAO, as of the end of
between these two documents. An audit to conform them 2012, 52 of these aircraft have been delivered. But in May
is clearly needed. That said, given that these weapon- 2013, Lockheed asserted that 81 aircraft had been “rolled
cost materials are in the DOD’s Chief Financial Officer’s out” of the factory in Fort Worth, and the new SAR from
annual reports to Congress
and the public, the data are
As with almost all DOD financial information, there is an important
also what we have every
right to expect to be DOD’s
caveat: the numbers displayed are estimates; they have not been
best effort at accuracy.
audited. We have no independent assurance that all the money
They tell an interesting
displayed was actually spent for F-35-related activities, nor that other
story.
monies from outside the F-35 program weren’t spent on the F-35.
From 1994 up to 2014,
$46.2 billion will have been
spent on R&D for the F-35;
$39.5 billion will have been spent on Procurement, and DOD states that only 50 have been delivered “to date”
$1.8 billion will have been spent on separately accounted (which is not specified). The discrepancies are unexinitial spare parts. That’s a grand total of $87.5 billion plained. Also, GAO reports that 179, not 182, aircraft will
(then-year dollars; that is to say actual appropriations) have been authorized by the end of 2014.
Even with the uncertainties in the authorized and
to have been spent by the end of 2014. Total F-35 spending has actually been decreasing since 2010 even though delivered aircraft, we can calculate what it has cost each
procurement spending has increased to more than $6 bil- year to buy an F-35. Figure 1 shows the procurement unit
lion per year and has stabilized at roughly that level since cost of each annual batch of F-35’s since 2008—that is,
4

Source: FY 1994-2014 Annual Publication of Program Acquisition Costs By Weapon System, Office of the Under Secretary of Defense (Comptroller), e.g. http://comptroller.
defense.gov/Budget2013.html

annual procurement cost divided by the number of aircraft authorized by Congress to be purchased in that
same year.
First, contemporary F-35 unit costs are today in excess
of $200 million, well above the Average Procurement
Unit Costs (APUCs) and Program Acquisition Unit Costs
(PAUCs) that DOD SARs report. It should also be noted
that contemporary unit costs are literally a multiple of
the commonly cited Unit Recurring Flyaway (URF) cost
($78.7 million for the Air Force’s F-35A) or of the $85 million envisioned in the future by the program manager,
General Bogdan. The program has a very, very long way
to go to even begin to approach these learning curve
reductions.
Second, by the end of 2014 the F-35 will have been
produced in significant annual amounts for seven years.
There has been ample opportunity for the learning curve
to have demonstrated some level of decreasing unit cost.
But it hasn’t.
Third, there is a discernible trend in F-35 fabrication
costs: they are increasing. As Figure 1 clearly shows, they
have been increasing since 2011.
Moreover, the unit costs have increased significantly:
by $19.5 million or 9.7 percent since the $199.8 million
from the Comptroller’s data for 2011, and by $14.5 million

or 7.2 percent since 2012.
Reasons for the increase in the already high unit costs
are becoming clear. A remarkable number of significant
F-35 components, even the airframe, have shown problems serious enough to require redesign. Thus, aircraft
configuration is in continuing flux. Paying for the fixes
and changes in fabrication on the production line is
clearly proving to cost more than whatever efficiencies
might be achieved on assemblies that—so far—do not
require modification. As long as the F-35 configuration
continues to change, there can be no meaningful learning curve.
Future years may prove even more costly: the more
stringent testing is still in the future and will not finish until 2019 at the earliest. And, still more issues may
occur even after that as the aircraft enters the operational
forces—flying often reveals still more problems, as has
been the case with the F-22.
What are we to make of the statements from Secretary
Hagel and General Bogdan that F-35 costs are “coming
down”? Reductions did occur two years ago, but to say
the unit costs “are coming down” is—to put it as politely
as possible—grammatically incorrect. They came down
then; they are going up now. n

www.pogo.org

5

SPECIAL REPORT

Where Do We Go from Here?

T

By Winslow Wheeler, Director, Straus Military Reform Project

he evidence for rising
F-35 unit costs is not
essentially different if
one takes a more detailed
look and separates out
the costs of the Air Force and Navy
variants of the F-35. See Figure 2
below.
Since 2012, the unit costs of Navy
models of the F-35 (the Marine Corps’
STOVL B variant and the aircraft-carrier capable C version for the regular
Navy) have increased, on average for
the two very different models, from
$216.6 million per aircraft to $277.9
million, an increase of $61.3 million
or 28.3 percent. (Unfortunately, the
Comptroller’s data do not provide
separate B and C costs.)

The Air Force’s A model actually
decline in cost from 2012 to 2013: from
$195.5 million per aircraft in 2012 to
$187.7 million in 2013, a decline of
$7.6 million or 3.9 percent. However,
the decline reversed in 2013, and
the 2014 budget request shows an
increase, albeit minor, up $0.8 million
or 0.4 percent to $188.5 million.
The statements of General Bogdan and Secretary Hagel that F-35
unit costs are “coming down” remain
false. There are years in the graph
in Figure 2 where a specific year is
lower than the preceding year, but
that is not the current trend—for the
F-35 program as a whole (as shown
in Figure 1 in the previous article) or
for either the Air Force or Navy vari-

ants separately (in Figure 2 below).
Moreover, the Navy variants will
cost in 2014 even more than they did
early in their procurement history;
the “learning curve” for the Navy
variants of the F-35 has been a negative curve.
On the other hand, Air Force models of the F-35 have shown an overall
unit cost decline since production in
2008, but the most recent trend is an
increase.
Beyond the year-to-year trends,
the most prominent characteristic of
F-35 costs is how high they are. In
the eighth year of production—after
significant opportunity for learning
curve efficiencies to occur—the Air
Force’s A model appears to be stabi-

Figure 2: JSF/F-35 A & B/C (Air Force & navy) procurement unit cost

n Air Force
n Navy

(Annual Procurement Costs) $Millions, Then-Year Dollars

$300
$250

269.1
235.3

224.7

237.3 241.9

235.8

222.5

216.6
195.5

$200

277.9

258.4

172.1

187.7

188.5

$150
$100
$50
$0

2008

2009

2010

2011

2012

2013

2014

Source: FY 1994-2014 Annual Publication of Program Acquisition Costs By Weapon System, Office of the Under Secretary of Defense (Comptroller), e.g. http://comptroller.defense.gov/
Budget2013.html

6

The Defense Monitor | April-June 2013

SPECIAL REPORT

lizing at approximately $190 million
per copy. The Navy models’ unit cost
has not stabilized; it is climbing dramatically, and is now projected for
2014 to be above $270 million each.
If one selects to add the continuing
costs of R&D ($1.9 billion that accompanies the purchase authorization for
29 aircraft for the Air Force and Navy
in 2014), the unit cost would be still
higher.
Even though the Air Force F-35A
unit cost is stubbornly hovering at
about $190 million per copy in the
eighth year of production, DOD documentation for the F-35A program
is predicting that it will plummet to
$107.1 million in 2018 when a purchase of 60 for $6.4 billion is scheduled. In other words, they are predicting that the unit cost will decline
by 43 percent in just four years, after
it has come down only 20 percent in
eight years and has remained stable
at $190 million per aircraft for at least
three years.
Learning curve predictions for the
Navy’s models are even more problematic. The B and C variants are
both more complex and, therefore,
more expensive than the A model,
and they have been showing dramatic unit cost increases in the last
three years; they now cost even more
than they did when their production
started in 2008. Prognostications that
they will achieve anything approaching what Congress today considers
“affordable,” especially as soon as
2015 when the Marines are declaring (actually pretending) their F-35Bs
will achieve combat capability, go
beyond implausible to fantastic.
In case you were wondering what
unit cost is “affordable,” be aware
that no one in Congress or the Pentagon has specified the number: to
do so would establish an accountable number that, when breached,

will cause no end of excuse-making
and too-obvious stretching of what
Pentagon wags call the “rubber baseline.”
Other factors further cast low unitcost projections into even greater
doubt.
First, the program faces additional
cost and production line learning to
address modifications to the aircraft
imposed by the developmental and
operational test programs. These
incorporate many modifications,
including to all three variants (e.g. to
prevent heat damage to the tail sections from the afterburner), and they
embrace modifications unique to
individual variants (e.g. the changes
now being attempted in the arrestor hook of the Navy’s C model to
enable aircraft carrier landings or
the redesign of multiple doors on
the Marines’ B model). Those costs
are being identified and will mount
up as the test program proceeds; the
appropriate changes in production
line fabrication techniques will be
introduced in time, with their commensurate learning curve disruption.
These costs—some already identified and funded, some identified but
not yet funded, and others not yet
identified—are estimated by GAO to
exceed $2 billion.
There will be still further costs for
capabilities that everyone will expect
the F-35 to possess but which are not
yet a part of the official program.
For example, the Air Force plans for
the F-35A to have a nuclear weapons delivery capability, but the costs
of making the F-35A nuclear capable have not yet been included in the
system development or production
of the F-35. There are other predictable costs, such as to upgrade F-35
software, improvements to obsolete
parts designed in the early years of
the program, expanding the F-35’s

connectivity to a wider range of communication equipment, and needed
upgrades to the capabilities of the aircraft’s sensors. In fact, the Pentagon
may even be planning on a follow-on
(and separate) development program
(with commensurate production
alterations) comprising multiple billions of dollars beyond the baseline
F-35 program.
The F-22, also produced by Lockheed Martin, provides a prime example: Since the F-22 was declared to
be operationally capable in late 2005,
GAO has identified almost $12 billion in upgrades and fixes to sensors,
communications, stealth coatings,
and other elements. The cost and
extent of such fixes and upgrades
for the F-35 are currently unknown,
but the need for them is recognized.
The costs will add to both total program and unit costs, even if they are
not a formal part of the F-35 program
today.
The appropriate question is not
how much the F-35 unit cost will
shrink but how much it will grow:
the Secretary of Defense and the F-35
program manager should be asked to
explain just what they meant and what
data they employed when they said
F-35 costs “are coming down.” Also,
the Defense Department’s SAR and
its prediction that the F-35’s total program costs are coming down should
be audited by an independent and
competent party. Moreover, because
GAO’s latest report on the F-35 sided
so clearly with the new hopefulness
for the F-35 (and because, for example, GAO described the dubious new
SAR cost “savings” as reflecting “the
improvements that we found in manufacturing”), it should be questioned
whether it, or rather its current management, should be the one to conduct such an audit. n

www.pogo.org

7

SPECIAL REPORT

On Final Approach
A Summary and Recommendations

E

By Winslow Wheeler, Director, Straus Military Reform Project

expect those economies to be offset,
if not more than offset, by additional
production and budgetary disruptions yet to come.
The very large size of procurement budgets scheduled for the F-35
in the future, as much as $16 billion
in 2021 (an increase of almost $10 billion from the procurement budget
for 2014), call into serious question
whether such large sums will actually be available in an era of lesser
overall defense spending. Reductions
in future F-35 procurement budgets
to adjust to overall budget realities, combined with pressures from
other Air Force and Navy spending
demands, make even more likely
retrenchment—and still higher F-35
unit costs. All of the above factors
make a very real possibility of a total
production run for the F-35 that is
significantly reduced from the 2,443
operational aircraft planned today.
It is not unreasonable to
expect future F-35 unit procurement costs to approxiIt remains inevitable that as actual costs sink in, fewer aircraft will
mate what they are today:
be purchased for increased cost. Given the hugely disappointing
over $200 million per aircraft, on average. It is not
performance of the F-35 and its continuing design problems, future
reasonable to expect that
deterioration in American and allied air forces, at higher expense, will
F-35 unit costs—for a comonly persist if F-35 production continues.
plete, operable F-35 force—
to decline significantly,
especially to a point anyThe statements of Secretary of impacted—upwards—by upgrades where close to the amounts currently
Defense Hagel and of the F-35 Pro- and other modifications not now a projected for 2018 and beyond, said
gram Manager, General Bogdan, that part of F-35 system development. to be $85 million by General Bogdan.
F-35 unit cost is “coming down” and While some economies of scale may The appropriate question is not how
“continues to come down,” respec- be achieved in larger production lots much F-35 unit costs may decrease
tively, are not accurate. As of the in the future, it is also reasonable to from their current levels, but how
ach year the public and
Congress have a right
to expect DOD’s Chief
Financial Officer reports,
titled Program Acquisition
Costs by Weapon System, to be complete and accurate. These reports
show that a total of $87.5 billion will
have been spent on the F-35 program
by the end of 2014: $46.2 billion for
R&D; $39.5 billion for Procurement;
and $1.8 billion for initial spare parts.
The reports also identify a total of
182 F-35 aircraft that will have been
authorized for production by the end
of fiscal year 2014.
The breakdown of each year’s procurement spending and authorized
production yields an annual F-35
unit production cost. For 2014, F-35As
will cost $188.5 million each; F-35Bs
and Cs will average $277.9 million
each; and all F-35s will cost, on average, $219.3 million.

8

The Defense Monitor | April-June 2013

President’s 2014 budget request, the
Air Force’s F-35A will have been
increasing in unit cost for two years;
the Navy’s F-35B and C will have
been increasing in unit cost for three
years. All F-35 variants, on average,
will have been increasing in unit cost
since 2012. F-35 unit costs are going
up, not down.
Having been in production for
eight years, it is reasonable to characterize the F-35 production line as
reasonably mature for whatever components have not already required
modification. We can expect additional costs on the production line
as it attempts to address problems
yet to be discovered in the 60 percent of developmental testing and
100 percent of operational testing
yet to occur—particularly in view
of the fact that future testing will
be more stringent than past testing. Unit costs are also likely to be

U.S. Air Force photo By Senior Airman Julius Delos Reyes

We can expect additional costs on the F-35 production line as it attempts to address problems yet to be discovered in the 60 percent of
developmental testing and 100 percent of operational testing yet to occur.

much they might increase. The history of combat aircraft acquisition
warns us that F-35 unit costs will be
much higher than are currently projected by the Pentagon and Lockheed
Martin and will remain well above
what can be characterized as affordable.
The data reported to the public
and Congress on F-35 costs and production from the Defense Department’s Comptroller do not conform
to the data in other DOD reports.
Even the number of F-35 units authorized to be produced and the number delivered are in dispute. Without
a complete and independent audit of
the F-35 program, including any costs
that may not now be a formal part of

the program as reported in Selected
Acquisition Reports, it is impossible to discern which DOD F-35 cost
reports, if any, are accurate, and precisely what F-35 costs are today and
will be in the future. In addition,
DOD’s more recent wishful declarations of long term cost savings need
thorough, independent scrutiny. That
GAO’s latest report on the F-35 has
sided so clearly with the new hopefulness for the F-35 calls into serious
question whether GAO, or rather its
current management, should be the
party to conduct the needed audit.
American taxpayers, the U.S. military services, and foreign purchasers—who have been promised F-35
aircraft for as little as $85 million

per copy—are in for a rude awakening: when real F-35 purchase prices
unfold in the future, they may be as
much as they are today.
It remains inevitable that as actual
costs sink in, fewer aircraft will be
purchased for increased cost, both in
the U.S. and abroad. Given the hugely
disappointing performance of the
F-35 and its continuing design problems—which have been discussed in
previous issues of the Defense Monitor
and other POGO and Straus Military
Reform Project publications—future
deterioration in American and allied
air forces, at higher expense, will
only persist if F-35 production continues. n

www.pogo.org

9

The Pentagon’s Newfound Interest in Slimming Down
By Christine Anderson, POGO Public Policy Fellow, and Ben Freeman, Ph.D., POGO Investigator

When even the Secretary of Defense asks for cuts to the Department of
Defense (DoD), it’s time to make those cuts. Unfortunately, the Secretary cannot make that change on his own—Congress holds the pen on
authorization and allocation of defense spending. In response to a letter
to Defense Secretary Hagel from Representative Keith Ellison (D-MN) and
eleven other Representatives that applauds the Secretary’s commitment
to a leaner military, Comptroller Robert Hale asked Congress for help as
the DOD seeks “to hold down defense costs while also meeting national
security needs.”
April, he came out swinging and
The bipartisan group of Repre- put the bloated Pentagon budget on
sentatives told Secretary Hagel they notice. Secretary Hagel bemoaned
support his pledge to “reshape the the increasing age and enormous rise
Department of Defense to better in expense of the military since 9/11,
reflect 21st century threats and fiscal noting that “the biggest long-term fisrealities.” The letter references both a cal challenge facing the Department
call from former senior national secu- is not the flat or declining top-line
rity officials to assess ways Congress budget, it is the growing imbalance
and the Administration can make in where that money is being spent
smart cuts to the defense budget and internally.”
Secretary Hagel seems prepared
the overwhelming public opinion in
favor of reducing Pentagon spend- to act on these concerns. “It is already
ing as reasons to commend Secretary clear to me that any serious effort
to reform and reshape our defense
Hagel’s leadership on the issue.
Comptroller Hale’s response enterprise must confront the princioutlines cuts the DOD has already pal drivers of growth in the Departmade—reductions in military mod- ment’s base budget—namely acquisiernization, force structure, personnel tions, personnel costs, and overhead,”
costs, and overhead expenditures— he said. He sharply criticized the
and what it’s doing now to address growing top-heaviness at the Penfiscal constraints. Specifically, he tagon, which the Project On Govasks these Members of Congress ernment Oversight has repeatedly
to support DOD’s proposed cuts. documented, and acknowledged an
Lower-priority weapons programs overall need to look long and hard at
and lower-priority military force the current personnel system.
Regarding acquisitions, he said:
structure are two areas he mentions
to illustrate his point.
We need to continually
This newfound concern with
move forward with designPentagon spending came with the
ing an acquisition system that
new leadership at the DOD—Secreresponds more efficiently,
tary Hagel has been reiterating its
effectively and quickly to the
importance at every opportunity. In
needs of troops and comhis first major policy address this
10 The Defense Monitor | April-June 2013

manders in the field. One that
rewards cost-effectiveness and
efficiency, so that our programs
do not continue to take longer,
cost more, and deliver less than
initially planned and promised.
Continuing in that vein, Secretary
Hagel addressed specific programs
the DOD has been trying—unsuccessfully—to cut. While testifying at
a House Armed Services Committee
hearing in April, he mentioned seven
Aegis cruisers and two amphibious ships that should be retired at
the end of FY 2014, more than 70
National Guard and Reserve aircraft
that are no longer needed to maintain
national security, and a number of
other programs ripe for elimination.
With enormous price tags attached
to each defense system, the question
seems obvious—why does Congress
keep funding programs the Pentagon
doesn’t want?
Pork-barrel politics, of course,
seems to be the answer—pet projects
that benefit influential constituents in
a Member’s district are at the heart of
these seemingly nonsensical failures
to cut unwanted and unneeded programs.
POGO and advocacy groups from
across the political spectrum have
been working tirelessly to cut the fat
in Pentagon spending, urging Congress to make the right choices for
smarter military spending to make
us safer. We are pleased to have the
Pentagon reminding Congress of
some of the low-hanging fruit for taxpayer savings.
Now, will Congress listen? n

update

S

Mismanagement of New Nuclear Facility
Will Cost Hundreds of Millions More

By Lydia Dennett, POGO Research Associate

ince the last Defense Monitor
article on the cost of the Mixed
Oxide Fuel Fabrication (MOX)
Facility at the Savannah River Site
in March 2013, the cost of the facility
has increased by $700 million.
The facility continues to be a
classic case study in Department of
Energy (DOE) contractor mismanagement and how it can cost the taxpayer billions of unnecessary dollars.
The MOX project, run by a private contractor called Shaw AREVA
MOX Services (Shaw), is part of the
National Nuclear Security Administration’s (NNSA) plutonium disposition program. Once complete, the
facility’s mission will be to convert
weapons-grade plutonium into MOX
fuel for use in nuclear energy reactors. The program lacks even a single
customer.
But perhaps the most troubling
aspect of the MOX program is its
never-ending cost overruns and
delays. In April, the Government
Accountability Office (GAO) reported
that the price tag for this impractical
facility would be $7.7 billion—a 381
percent increase from the original
estimate of $1.6 billion. And the project has fallen ten years behind schedule.
But even $7.7 billion is far from
the bottom line. An independent
life-cycle cost estimate done by local
Savannah River Site expert and the
Southeastern nuclear campaign coordinator for Friends of the Earth, Tom
Clements, shows just how expensive
this program is. Incorporating con-

struction costs as well as “a host of
other expenses, including administrative buildings and administrative costs, yearly MOX plant operating costs, MOX plant start-up costs,
plutonium feedstock preparation, a
facility to treat MOX waste (Waste
Solidification Building) and waste
disposal costs, payment to utilities to
use MOX fuel in their nuclear reactors and decommissioning of facilities,” Clements found that the MOX
facility is much more likely to cost a
staggering $22.1 billion.
Although this is not an official
number, neither the NNSA nor the
DOE has refuted it or released their
own life-cycle cost estimates.
These massive cost overruns and
schedule delays are not the only failing of Shaw. A May 2013 DOE Inspector General (IG) report found that the
contractor overbilled the NNSA by
about $3.7 million from 2007 and 2011
in order to reimburse its subcontractors for living expenses they were not
eligible to receive.
Inspector General Gregory H.
Friedman found that the NNSA “had
not effectively monitored” Shaw. “As
a result, NNSA unnecessarily paid as
much as $3.7 million...that could have
been devoted to other critical mission

$7.7 Billion

GAO-reported price tag for the Mixed
Oxide Fuel Fabrication Facility. A 381%
increase from the original estimate.

areas or returned to the taxpayers,”
Friedman wrote. He also found that
the contractor lifted spending caps
that could have kept costs down and
didn’t regularly enforce reimbursement eligibility requirements.
The DOE IG has been concerned
about MOX since a 2005 audit investigation revealed that MOX mismanagement was going to cost the agency
major money. The cost overruns had
already begun and the audit found
that “adequate attention was not
given to establishing an appropriate
performance baseline or ensuring
that reporting mechanisms to monitor progress and track costs were in
place.” These failings, along with a
lack of oversight, contributed to a tenyear delay and a price tag that just
keeps growing.
There is some good news, however. In the DOE’s FY 2014 budget
request, MOX funding was reduced
by about 75 percent over the next five
years to slow construction in 2014
and explore alternative plutonium
disposition strategies. But the roof
of the facility has already been completed, and some are concerned that
the funds will merely keep the project on life support when it should be
killed. Thus, it’s still too early for celebration. Senator Lindsay Graham
(R-SC), who represents the county
hosting the MOX facility, has continued to pledge his support for it.
Hopefully this effort will prove futile
and that other policymakers will
continue to move in the right direction and zero out funding for this
unnecessary facility. n
www.pogo.org 11

THE DEFENSE MONITOR
The Project On Government Oversight is a nonpartisan independent watchdog that champions good government reforms. POGO’s investigations
into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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